Rosewood Hotels & Resorts: Branding to increase customer profitability and Lifetime Value Harvard Business School Case
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Rosewood Hotels & Resorts: Branding to increase customer profitability and Lifetime Value
Harvard Business School Case
What is Rosewood?
Who is John Scott?
What is Rosewood
• Hotels & Resort Company
• 13 different properties spread across the globe
• Known for great properties, with each of it’s property itself as a brand
Key Players
• John Scott
• Robert Boulogne
President and CEO
Vice President of Sales & Marketing
Current Scenario
Situation Analysis• Owns very highly valued properties and resorts
• Customers loves the individual properties and brands but fail to recognise ‘rosewood’.
• New branding strategy for higher customer retention rate and multi property visit rate
• Need to evaluate the new strategy and analyse the future of the company, with and without the new strategy
Why study this case?
Objective of this case (1/3)
• To analyse the new strategy and discuss it’s pros and cons for the future of Rosewood group.
• To develop an understanding of collection strategy and corporate strategy
Objective of this case (2/3)
Understanding concerns of Loyal Customers and Resort Managers
Objective of this case (3/3)
• Evaluate the profitability in long term by evaluating profits generated versus costs incurred
• Understanding the role of decision on brand equity
Three Issues to analyse and understand
Three Issues
Analysing behaviour and POV of Loyal Consumers and Managers
1
Three Issues
Revisits and Multi-property visits
2
Three Issues
Analysing Customer Lifetime Value and evaluating the profits of corporate strategy
3
Behaviour and Point of View of Loyal Consumers
and Managers
History
• Selling point : One of a kind properties, Point of Differentiation
• Hotels with brand name greater than ‘Rosewood’ itself
Consumers
• Reluctant to go towards bigger brand
• Feeling of exclusiveness
• Emotional attachment towards brand name
–Robert Boulogne
“Hotel Managers are more inclined to promote just their own individual hotel brands,
particularly if they have a strong brand”
Managers
Bottom Line
It is not in the best interest of Managers and Loyal Consumers to directly switch to corporate branding strategy and hence certain modifications are required.
Revisits and Multi-property Visits
–John Scott
“While guests were seeking a unique Rosewood property experience and product, they were not
making the connection between Rosewood properties and were increasingly identifying with
other strong hotel brands”
No identification
Limited Market
People want Brands
Smal sophisticated segment value exclusiveness
Testimonies of Travel Agents
• “Clients are not aware of it. They do not come to me asking for Rosewood properties”
• “In Dallas, yes it definitely helps”
Is name Rosewood meaningful in encouraging your clients?
Strong Individual Brand/Property
Recognition
Rosewood namerecognition is low
Effect of corporate branding(1/2)
• “Aman Junkies” take pride in collecting the Aman Experience
• Preserves uniqueness and at the same time help customers develop connection b/w different properties
• More than 10,000 repeat guests with only 500 rooms.
Aman Resorts Case
Effect of corporate branding(2/2)
2x times better
Multi-property visits
Bottom Line
Corporate Strategy is the way ahead, it helps us expand Markets, and we can leverage on our existing property brand names.
New properties (Acqualina, Tuanovo Bay, La Solana and Laguna Kai) can leverage on brand names of ‘The Carlye' and ‘The Mansion’
Customer Lifetime Value
Analysing CLTV for next 6 years
CLTV
• Reluctant to go towards bigger brand
• Feeling of exclusiveness
• Emotional attachment towards brand name
$139
24,91911,500
21.67%$90 $81
$159
Analysis (1/2)
• We observe that the overall guest retention rate improved from 16.67% to 21.67%
• Multi property visits doubled
Analysis (2/2)
• Although the net profit per guest is reduced, it might be compensated by the retention rate of old guests
CLTV (1/2)Years 0 1 2 3 4 5 6
Gross profit per guest
US$ 240.00 US$ 259.20 US$ 279.94 US$ 302.33 US$ 326.52 US$ 352.64 US$ 380.85
Acquisition expense per new guest
US$ 150.00 US$ 153.90 US$ 157.92 US$ 162.05 US$ 166.32 US$ 170.71 US$ 175.23
Marketing Expense per guest
US$ 130.00 US$ 133.90 US$ 137.92 US$ 142.05 US$ 146.32 US$ 150.71 US$ 155.23
Net Profit per guest
US$ 90.00 US$ 105.30 US$ 122.02 US$ 140.28 US$ 160.20 US$ 181.93 US$ 205.62
Churn Factor
83.33 83.33 83.33 83.33 83.33 83.33 83.33
Discount Factor
8 8 8 8 8 8 8
Net Present Value
US$ 0.14 US$ 0.16 US$ 0.18 US$ 0.21 US$ 0.24 US$ 0.27 US$ 0.31
Customer LTV
US$ 0.14 US$ 0.29 US$ 0.48 US$ 0.69 US$ 0.93 US$ 1.20 US$ 1.51
Without Rosewood Branding
CLTV (2/2)With Rosewood Branding
Years 0 1 2 3 4 5 6
Gross profit per guest
US$ 240.00 US$ 259.20 US$ 279.94 US$ 302.33 US$ 326.52 US$ 352.64 US$ 380.85
Acquisition expense per new guest
US$ 159.00 US$ 163.17 US$ 167.47 US$ 171.89 US$ 176.45 US$ 181.14 US$ 185.97
Marketing Expense per guest
US$ 139.00 US$ 143.17 US$ 147.47 US$ 151.89 US$ 156.45 US$ 161.14 US$ 165.97
Net Profit per guest
US$ 81.00 US$ 96.03 US$ 112.47 US$ 130.44 US$ 150.07 US$ 171.50 US$ 194.88
Churn Factor
78.33 78.33 78.33 78.33 78.33 78.33 78.33
Discount Factor
8 8 8 8 8 8 8
Net Present Value
US$ 0.13 US$ 0.15 US$ 0.18 US$ 0.21 US$ 0.24 US$ 0.27 US$ 0.31
Customer LTV
US$ 0.13 US$ 0.28 US$ 0.46 US$ 0.67 US$ 0.91 US$ 1.18 US$ 1.49
Bottom Line
The increase in rate of Marketing expenses is too high and even the retention rate is not able to counter it and we obtain a lower CLTV for corporate strategy.
Although the assumption of same no. of unique guest may not hold valid, specially with newer properties coming up, the visits will be higher for corporate strategy.
DisclaimerCreated by Parakh Agarwal, IIT
Delhi.During Marketing Internship under Prof. Sameer Mathur
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